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BSc International Business, Finance and Economics with Industrial/Professional Experience / Course details
Year of entry: 2020
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Course unit details:
Share Prices and Accounting Information
|Unit level||Level 3|
|Teaching period(s)||Semester 1|
|Offered by||Alliance Manchester Business School|
|Available as a free choice unit?||No|
Accounting information, broadly defined, is regarded as being useful in evaluating equity investments. The module reviews various models that have been proposed for calculating a firm’s intrinsic equity value. These formal valuation models link share price or returns to items from the income statement and the balance sheet and include the Simple Earnings Capitalisation Model, option-style valuation models, and Abnormal Earnings Valuation Models. In addition, the module introduces the notion of earnings conservatism and argues that earnings conservatism is related to share price anticipation of earnings.
The final three lectures examine three topical issues around the value-relevance of information provided by firms outside the financial statements. One lecture looks at the tone, or sentiment, in press release narratives, and examines whether investors are misled by abnormal positive tone when pricing equities. Another lecture examines whether additional annual report narratives increase, rather than reduce, the cost of equity capital. The final lecture looks at reporting frequency and asks whether quarterly statements are needed for information efficient prices – a topical issue given the current debate in the US on whether or not to stop quarterly reporting.
|Unit title||Unit code||Requirement type||Description|
|Foundations of Finance A||BMAN23000||Pre-Requisite||Compulsory|
|Foundations of Finance B||BMAN23000B||Pre-Requisite||Compulsory|
Pre-requisite course units have to be passed by 40% or above at the first attempt unless a higher percentage is indicated within this course outline. If the pre-requisite unit is defined as a compulsory course unit within your programme of study (Maths with Finance, IBFE, Accounting, BA Econ pathways for example) then progression onto the dependent unit is permitted as long as you have gained the appropriate amount of credit to progress on to the following year of your registered undergraduate programme.
Pre-requisites: BMAN23000(A) or (B) Foundations of Finance
Dependent course units: None
The course aims to increase students’ knowledge of how accounting information, broadly defined, affects equity prices. Students will learn how models are constructed and how models are tested by logical criticism and empirical evidence.
On completion of this course unit, successful students will:
- have an understanding of how accounting information affects equity prices, including a familiarity with seminal and topical research development, and an understanding of the limits of such developments;
- have the ability to evaluate theories and evidence related to formal accounting-based valuation models;
- have an understanding of the price-relevance of accounting-related information provided outside the financial statements, like, for example, narratives in annual reports, quarterly reports, and press releases;
- have an understanding of the methodology that is employed in order to test price-relevance empirically;
- be able to access relevant journal articles in accounting journals and draw on them in critical consideration of arguments;
- be able to use communication and information technology (e.g. spreadsheets) in acquiring, analysing and communicating information.
Teaching and learning methods
16 one-hour lectures over 9 weeks (workshops included in lecture slots).
Total study hours: 100 hours split between lectures, workshops, reading, self-study and preparation for classes, unassessed coursework and examination.
2 hour examination (100%)
For semester 1 only exchange students admitted via the Alliance Manchester Business School International Office that take this course as BMAN30851 the assessment will be an 8 page research report.
Methods of feedback to students include:
- Informal advice and discussion during a lecture and workshops;
- Responses to student emails and questions from a member of staff;
- Generic feedback posted on Blackboard regarding overall examination performance.
It is very important to note that the module is based to a large extent on journal articles. The main journals of interest in this course are Accounting Review, Journal of Accounting & Economics, Review of Accounting Studies, and Accounting & Business Research (ABR). The first three journals are US journals while ABR is a UK journal.
Several parts of the module are also covered in the following two textbooks:
- Barker, R. (2001). Determining Value: Valuation Models and Financial Statements, Harlow: Financial Times Prentice Hall.
- Scott, W. R. (and O’Brian, P.) (2019), Financial Accounting Theory, 8th edition, Pearson.
To understand the methodology employed in empirical tests we need to have an understanding of some econometric tools like OLS estimates, t-tests and dummy variables. These tools will be introduced in Lecture 2. Two standard introductory textbooks in econometrics are:
- Maddala, G. S. (and Lahiri, K.) (2001 or 2009). Introduction to Econometrics, 3rd or 4th edition, John Wiley & Sons Ltd.
- Wooldridge, J. (2018). Introductory Econometrics: A Modern Approach, 7th edition, Cengage Learning.
|Scheduled activity hours|
|Assessment written exam||2|
|Independent study hours|
|Thomas Schleicher||Unit coordinator|
Length of course: 9 weeks
Programme Restrictions: There are no programme restrictions for this course providing the pre-requisites listed above are met.
BMAN30071 is available to study abroad and exchange students admitted through the University of Manchester International Programmes Office.
For Academic Year 2020/21
Updated: March 2020
Approved by: March UG Committee